Startups Venture

A Few Startups Still Vie For Messaging Riches

A few days ago, in a post inspired by Snap’s IPO, we looked at well-funded messaging startups that haven’t made the unicorn club. But we’d hate to leave it looking like all the winners in the space are already crowned.

Looking at recent venture and angel rounds in the broader messaging app sector, it’s clear investors still see potential for some venture-scale returns. An analysis of investment in the space using Crunchbase data showed at least a dozen companies have raised rounds of a few million or more, with over $300 million in total investment in the past year.

That said, no one is getting the massive private funding that Snap saw in the two years leading up to its public offering. The company raised $1.8 billion in a single round last May and took in over $2.6 billion in total before going public.

Still, we are seeing some big rounds, concentrated across a handful of investment themes. Messaging apps that offer added layers of confidentiality are in vogue. Platforms with the potential to add new revenue-generating capabilities, such as commerce, are also drawing attention. Mostly, however, money appears to follow apps that, for whatever reason, have generated a large and youthful following.

Here are a few:

  • Hike: New Delhi-based Hike has seen strong uptake in India for its free messaging and calling platform, which has the keenest following among younger users. The company gained unicorn status last year with a $175 million investment led by Tencent at a reported $1.4 billion valuation. Five-year-old Hike has raised more than $250 million to date. Hike faces steep competition from Facebook-owned WhatsApp, which is India’s dominant chat app. However, there’s hope the investment with Tencent will have strategic benefits, given the success of Tencent-owned WeChat in getting users to use it for ecommerce and other services.
  • Snow: Often described as a Snapchat clone, Snow principally targets users in China, Korea, and Japan, collecting more than 40 million active users as of January.  Snow and Japan-based messaging app Line share a parent company, Korea’s Naver, which has produced some synergies. Line bought a 25 percent stake in Snow in September and doubled its stake earlier this year.
  • Kik: To date, more than 300 million people worldwide have signed up for Kik, the messaging app known for features that help users preserve anonymity, like not requiring a phone number to register. The app is particularly popular with teenagers. However, it’s anonymity features have also drawn criticism for enabling the app’s involvement in illegal and unsavory activities. Waterloo, Ontario-based Kik raised $50 million from Tencent in 2015. Earlier this year, it acqui-hired Tel Aviv based app developer Rounds.
  • Dubsmash: While it’s more of a niche offering, Germany’s Dubsmash has gained a big following for its app, which allows users to lip sync over clips of popular audio clips and send their creations as video messages. The Berlin-based company has raised more than $15 million to date, including a round of nearly $10 million in November. It’s got some big-name backers as well, including Index Ventures, Balderton Capital, and Chris Sacca’s Lowercase Capital.
  • ChatGame: Video chat is great, but less appealing when you’re not looking your best. China-based ChatGame aims to rectify this problem with a beautification app for video chat users. It offers features to change complexion, reduce glare, even thin out your face, all while on a call. The three-year-old company raised a $14 million venture round in May. However, download volume appears to have slowed in recent months, according to AppAnnie.
  • Confide: A year ago, Confide closed a $1.6 million extension to its seed round, bringing total funding to $3.6 million. Confide allows users to send encrypted messages that self-destruct. It also allows message retraction. Backers include WGI Group and First Round. Notably, Confide is the only company in the Crunchbase database that lists Billy Bush—the other voice in Donald Trump’s most infamous recorded conversation—as an investor. We’re not sure what that means, but it’s interesting.

It doesn’t look like investors are expecting any of these to be the next Snap or WhatsApp. If investors did, we would see them backing bigger rounds and we’d see more growth-stage venture investors involved. As it stands, the only one bringing in unicorn-level capital is Hike, which, though big in India, has not secured a global footprint.

Stay up to date with recent funding rounds, acquisitions, and more with the Crunchbase Daily.

Copy link